Case study : part 1

Today, we will look into a story of a happy Captain who failed to inspect the order and condition of the cargo, but luckily escaped all severe consequences. To brief this case, the vessel was on a timecharter trip from ports of China to Congo with generals: cement in bags, vehicles, some trucks and containers. Can you imagine how much work would have to be done by the Master? One may know that regardless whether doing a timecharter or a single voayge, the carrier bears the same obligations as per bills of lading. That's why our Captain would have to be well aware of the order and condition of the cargo loaded, and pay attention to the appearance of bills of ladings.

So, clausing "order and condition unknown to Master" is not acceptable, since the Master is obliged to inspect order and condition. He should avoid a wide clausing, since such may be meaningless. For instance, "totally 10 vehicles, 3 vehicles with broken bulbs, remaining ones are in apparent order and condition" is better than "totally 10 vehicles, some with broken bulbs", since the last wording is too wide. If the reason of damage is known, e.g. damaged caused by stevedores, it should also be mentioned. Where practicable, the clausing should include reference to package number, e.g. package N234 torn. Apparently, the Captain was unable to determine by inspection the cargo marks and seal numbers (as same are not mentioned in the Mate's receipts) . If the bills of lading show such unknown to the Master marks, the Master should request the shippers to delete the reference to them. To be continued ...

General clausing Bills of Lading

In the course of several days, we have been discussing the procedure of signing bills of lading. It has been mentioned that the description of the goods, its apparent order and condition should be accurate to 100%. To recap the main line of discussion, if a bill of lading is not accurate then it should not be signed. As simple as that. Instead , a replacing bill of lading with accurate description should be demanded. If such provided, all originals and copies of the previous erroneous bills of lading should be destroyed. However, due to a time limitation, a replacement is not always possible. Therefore, the inaccurate bills of lading should be claused before signing and issuing. Clausing means writing a remark on the bill of lading with actual finding.

The Master should not give way to requests of the charterers or shippers to accept a "letter of indemnity" in return for issuing a clean bill of lading, given that there are doubts as to the apparent order, condition and/or description of the goods. Even if the charterers and/or shippers argue that the letter of credit (and the future of the sales contract) is dependant on the "clean" bill of lading, unhappily, it is their problem. One way or another, at this stage, the Captain is the Buyer's representative acting on his behalf with respect to clausing the goods.

Besides, the Master has no way to check and to know whether clausing bills of lading is of commercial importance or not for this particular deal, but he is obliged to issue correct bills of lading anyway.

The Master should be very carefull with respect to the wording for clausing. (this we will try to analyse in one of our discussions to come). As has been mentioned, clausing must comply with Mate's receipts. If Master can't provide required carriage conditons, say, required degree of moisture and temperature, he should clause bills of ladings. If clausing can't be done on the face side, it is made on the reverse side with appropriate reference on the face side. There must not be contradicting statements. Contradicting statements should be overridden by handwrinting. It is in practice and widely accepted that handwriting overrides typed statements, while typed statements override printed statements. If there is no space on the bill of lading for clausing, an attachment should be used duly signed, dated and stamped "original as per bill of lading". If, due to limited time, the Master has no time to check bills of lading, he may authorise and instruct the ship's agent to issue bills of lading on his / carrier's behalf.

Prospective cargoes

Gentlemen, in this section you can post prospective cargoes to be shipped. Please do not forget to mention your commission, if the case.

Mate's receipts

The role of the Mate's receipts issued by the Master to the shipper is to prepare the bills of lading. The Mate's receipts are returned back to the Master in exchange for the signed bills of lading. (it is advisable for the Master to have a copy of all Mate's receipts on board to be able to compare with the bills of lading presented for signature ). Obviously the description of the goods in Mate's receipts should reflect the factual cargo being loaded. Otherwise Mate's receipts can be claused before signing. The Mate's receipt is the evidence in its own right of the condition of the goods as well as when same are received.

If the bills of lading can not be prepaired by the time of vessel's departure (e.g. the cargo has not been sold yet), the Captain may be requested to authourise his agent and/or shippers to sign bills of lading on his behalf. The Master issues a letter of authorisation to the agent and/or charterer, and ensures that cargo description and the date of shipment are accurate in Mate's receips. He also ensures that the mate's receipts contain all details and remarks that the bills of lading should contain. (The letter of authorisation clearly states that the bills of lading shall be signed in accordance with mate's reeipts. ) If the charterer and/or agent refuses to sign the bills of lading in accordance with Mate's receipts (or accep the letter of authorisation), the Captain shall issue a letter of protest and inform his management.

Dealing with damaged cargo

At the beginning of the new business week, we continue our talk on dealing with the damaged goods.

If it is clearly recognized that the cargo is damaged, and given that the charter party requires clean bills of lading, any cargo which is not in apparent good order and condition must be rejected by the Master. The shipper must provide a replacement in this case (otherwise clean bills of lading must not be issued ). Captain informs the shippers and demands for a confirmation in writing that the bills of lading will be claused, unless the damaged are replaced with good. If the shipper does not accept claused bills of lading, and is not providing a replacement of goods, the Master should issue a protest in writing stating that he is at liberty to reject the cargo. If there is no effect, the Master stops loading operations, if partial cargo have already been loaded, the Master takes steps to discharge the cargo, if such means of discharge are available. However, the Master should not give formal rejection without appoval from his company, as such step may result is cancellation of the charter party.

The damage to goods may be caused by stevedores at time of loading. The Master should request for replacement of such, and should protest against stevedores describing the damage.

Broken container seals are dealt similar to damaged cargo. The shipper should replace such seal with a new one. If the shipper refuses to replace the seal, the Master should protest in writing, replace the seal and clause the Mate's receipts. The Captain should also examine the contents of container for apparent good order and condition of goods inside. The damages to the goods inside are treated the same way as have been described.

Hague/Hague-Visby Rules : cargo inspection

In the post of this morning, we will go into some operational aspects of cargo inspection. Before signing bills of lading, a Captain should be familiar with the provisions of the Hague/Hague-Visby Rules. Some part of these rules concerns his obligation , as the Master, to arrange cargo inspection. Should the Master fail to inspect, he will not be able to check the accuracy of the cargo description in the bills of lading, and given strong commercial pressure, may sign inaccurate bills of lading presented by the shipper. Master should develop a strong knowledge of the cargo and be familiar with the loading and inspection practices. It is always preferrable that either the Master or his senior deck officers perform the cargo inspection. A surveyor may be appointed to perform the cargo inspection as well, but, in this case, the Master should be fully aware whether the cargo survey is performed on his behalf or not.

Referring to the Hague/Hague-Visby Rules, the goods should be inspected for "apparent order and condition". What does it mean for the Captain (or deck officer) to inspect according to the rules?

The Captain's inspection should :

- determine general type of cargo (e.g. steel, wheat, soyabean meal or coal) and type of packing;
- find and record any apparent damage or defect with the cargo;
- identify whether packing is sufficient and adequate to protect the perishable goods during sea voayge;
-be carried out by a responsible deck officer, but not a quality expert (!) ;
- identify apparent damages by sight (!) and not hidden damages, as the deck officer is not supposed to remove the package and analyse, or test the cargo as the quality expert does;
- record parts and/or sides of cargo not available (e.g. visible) for inspection;
- preferrably be done at regular intervals while loading to obtain a fuller picture and to prevent possible problems (e.g. contamination or moisturing);
- obtain samples of inspected cargo to serve as evidence of the cargo's condition;
- check whether the marks made on the cargo are readable and whether they will remain so till the end of sea voayge;
- perhaps, state reasons why number, weight or quantity can not be determined;
- accurately record results of calculation of the draft survey, tally, ullage ;
- record observations that may affect accuracy of both ship's and shipper's figures (e.g. due to swell);

So much work to do for a single Man!

Bills of lading: accurate date

We will continue our small talk on how to arrange bills of lading properly. Accurate date of the bills of lading is very important, since the date inserted in the bill of lading evidences the date of shipment. Surprisingly, the market value of the cargo in the sales contract may be based on the date of shipment stated in the bill of lading!

Practically the Master and his agent at the port of loading ensure that the date is correct. There may be serious consequences for ante/post -dated bills of lading! The carrier may be exposed to claims from the receivers, and the P&I club will, most likely, withhold from covering such claims.

A good Captain should strongly resist offers from the charterers and/or receivers or whomever to issue ante- dated bills of lading, even against presentation of a "letter of indemnity"!

Signing bills of lading: consequencies of inaccuracies

The talk of this morning will concern inaccuracies in the bills of lading and consequencies for the carrier. Captain, as shipowner's representative, must do his best to avoid inaccuracies or even deliberate falsehood when signing bills of lading.


He should remember that the carrier may be exposed to claims from the receivers at the port of destination. If there are no remarks to the state of the cargo, the bills of lading are assumed to be clean. This means that the goods, delivered on board, are in good order and condition. However, if the consignee, at the port of destination, receives the goods being damaged, or finds a shortage, he is entitled to make a claim. Since the carrier will not be able to prove that the goods were loaded as described in the bills of lading, it will be difficult to protest the claim.

Accurate description of the goods is also very important for negotiable bill of lading when the transferee relies solely on the description of goods as they have been loaded (and described)!

So the poor carrier may lose his right to limit liability for cargo damage and/or shortage with some protection and indemnity (P&I) clubs, since some P&I clubs may withhold cover for claims, for example, when the description of the goods in the bills of lading is incorrect.

Therefore, in order to protect his shipowner, a good Captain should not sign bills of lading describing the cargo inaccurately, and should not give way to requests of the charterer and/or shipper to accept a letter of indemnity in return for issuing "clean" bills of lading (without fair clausing) or to issue bills of lading which describe the cargo inaccurately on purpose!

Bill of lading : document of title

How does a Captain know to whom to deliver the cargo at the port of destination?

-> to someone who is entitled to delivery of the goods at the port of destination! Having an original of bills of lading at hands is the evidence of title.

Yet, as mentioned before, the goods can be traded while being in transit. This means that bill of lading becomes negotiable, i.e. can be transferred from a consignee with the title (mentioned in the bill of lading) to a consignee without the title (not named in the bill of lading).

The so-called order bills of lading, having the words «to order (or assigns)» inserted instead of a named consignee, allow the shipper to transfer the bill of lading to any person. To allow transfer to any person, the shipper or consignee endorses the bill of lading and the bill of lading can now be passed to the named endorsee. Once again. The endorsee can transfer the bill of lading further by adding the words «to order (or assigns)» against the named endorsee. This property of bills of lading is known as transferability!

Evidence of contract of carriage

The second function of the bill of lading is the evidence of the contract of carriage between the carrier and the shipper. This function is equally applicable to bills of lading being either negotiable or not.

The reverse side of the bill of lading usually contains the terms of carriage. If the carrier and the shipper have negotiated special terms of the carriage, the relevant charter party should be incorporated in the bill of lading.

One may be inquiring why there is a need to incorporate a charter party in the bill of lading? The answer is very simple. In fact, the bill of lading may end up in the hands of a third party who is not even a charterer. Therefore, to limit the carrier’s obligation only to the terms of the charter party, such terms should be incorporated in the bill of lading by using a reference to the charter party on the face-side of the bill of lading. For example, basic general wording such as “all terms and conditions of the charter party dated … are herein incorporated” may be used.

Don't forget to ask your Master to ensure that the reference is given to a correct charter party date!

A look into the history of bill of lading

A curious mind may ask a question like when the bill of lading became known? May an answer be that so long ago as when the trade in the Mediterranean began to grow?

Anyway, goods to be shipped had to be recorded in a ship's register. There was no need for a bill of lading in a sense as it is understood today as long as a Merchant travelled with goods on board of his ship.

The practice began to change when the Merchant felt that he had become too old for sea voyages. He started to send goods to his agent at the port of destination. He diligently wrote instruction on the type of cargo being sent and how to deal with it: either to sell in the market or to deliver to an existent Buyer.

The Merchant found that it may be too complicated to maintain a ship, and decided to outsource a good boat. The Captain of the boat earned for living by transporting goods. That's how the first function of bill of lading (as receipt for the goods to be shipped) became active.

There was no proof for the consignee's entitlement since the carrier (Captain) knew from his copy of receipt to whom delivery to be made. The need for proof of entitlemement became evident when the goods started to be dispatched before the receiver of the goods had become known to the shipper. At those times, the cargoes were not supposed to be traded many times during the sea voayge, as they are today. Yet, the delivery could now be made either to the shipper's agent or to a third person (the buyer of the goods).


The first function of the bill of lading (being the evidence of receipt) is applicable to either negotiable or not bills of lading. The evidence of receipt implies stating the date of receipt and condition of goods (type and true state of cargo, its weight, volume and number) to the bill of lading. Ensuring accuracy of such information is very important. Master or one of the Mates checks the actual state of cargo and clauses the cargo with remarks in Mate’s receipts, and then, transfers this information to the bills of lading. Clausing bills of lading means writing a remark reflecting actual findings in condition of cargo.

Instead of intro

For many centuries, bills of lading have been used for the carriage of goods in seaborne trade. Since old times, the function of it is threefold: (1) evidence the carrier's receipt of the goods; (2) the contract of carriage; (3) document of title for possession of the goods. In spite of the state-of-the-art paperless trade, for the comming future, Masters will still be obliged to sign and authorise signature of bills of lading and to deliver cargo against the same.

Bill of Lading, as an example of a cargo document, is the first, but surely not the last topic that we suggest for the shipping community to discuss in our blog. You are encouraged to investigate all the links at our blog to find an answer to a question of your interest. Should you fail to find any satisfactory answer, please leave your comment, and we will try to revert with our comprehensive advise as soon as possible. Other topics of conversation are also very welcome! Remember that you can always contact us on our e-mail!